“These trends affect both pay-as-you-go schemes and funded schemes,” says Eva Kiwit, secretary general of the European Association of Public Sector Pension Institutions (EAPSPI). “For instance, although high unemployment does not, in general, affect public sector pension schemes directly, it has a significant secondary effect by making resources scarcer.”

Some problems vary according to country, as they may relate to a country’s economic situation. Portugal, for example, is now implementing a 10% cut in the civil service pension scheme.

In Spain, public sector bodies have been banned from paying contributions into second-pillar schemes. While second-pillar coverage in Spain is generally not widespread, this development is particularly detrimental to Elkarkidetza, a public sector scheme in the Basque region where occupational schemes are more common.

The public pensions sector also faces challenges in terms of regulation. At present, potential quantitative requirements arising from Solvency II, which might be incorporated within the IORP Directive, are a particular headache. “Solvency II introduces consumer protection, but pension schemes don’t have consumers, they are a tripartite structure including members, employers and providers – the schemes themselves,” says Kiwit. “Their horizons are also much more long-term than for the consumer market.”

She continues: “We are concerned that the final IORP will contain quantitative requirements. These will be very expensive for pension schemes, affecting both solidarity, and the adequacy of pensions.”

EAPSPI acknowledges that it makes sense to have a European supervisory authority – EIOPA – where there is European legislation. But Kiwit says EAPSPI is concerned about mixing policymaking and supervision. “EIOPA exerts influence on national supervisory authorities by publishing legal guidelines, but they lack clarity,” she says.

“Furthermore, the European Commission (EC) has put a significant part of the IORP Directive on hold, but EIOPA’s approach towards risk assessment and solvency suggests that this is based on quantitative requirements which are not in line with the legislative outlook of the EC.”

Another source of concern is the Supplementary Pension Rights Directive (the former Draft Portability Directive). A draft exists already and is being discussed between Council, Commission and Parliament. Kiwit says that although the new framework will be intended for cross-border schemes, she expects it to be applied in practice to all occupational schemes.

“The German ministry of labour has already made clear it will not make a distinction between single-country and cross-border schemes, because it could lead to a European Court of Justice case on discrimination,” she says. “However, some other countries have different rules for the two types of scheme – such as for vesting periods. We are calling for the involvement of social partners on this issue, especially as it is not clear from article four of the draft directive what the effect on social partners will be.”

The road to privatisation has also brought problems. Public sector schemes in many countries are largely run on a pay-as-you-go basis – active members’ contributions are generally paid out straight away to pensioners as retirement income, so the scheme does not build up an investment portfolio. If part of the operation is privatised, that means a proportion of contributions is lost, while the amount paid out to pensioners remains at the same level.

Pay-as-you-go schemes have coped with this by making benefits less generous. But in Germany, where public pension scheme members transfer to a private company there have been lawsuits to determine to extent to which the new employers and the public pension scheme are responsible for accrued rights.

It has now been established that the new employer assures all the rights and obligations of the former public entity, and social partners have modified the calculation method to define the accrued rights. But they can choose whether to stay in the public sector scheme, or to join or set up a new scheme.

Another issue for EAPSPI is incentivising long-term investment, although Kiwit sees a contradiction in moves to develop this. “EIOPA’s current discussions on quantitative regulations suggest a one-year time horizon,” she says. “But pension funds have to look at long-term horizons. So they should not be punished on their balance sheets. Maybe they should be given incentives, say, tax incentives, to promote long-term financing.”

EAPSPI is not in favour of any one particular solution for any of the above issues. But it does aim to promote discussion and bring clarity to the debate. “The main challenge is the complexity of pensions systems,” says Kiwit. “Some problems can only be solved within an EU dialogue; others need to be solved at national level. Furthermore, changes in public sector pensions will have a direct effect on public spending, and are therefore very sensitive.”

As for what the EU should be doing, Kiwit says it is important to respect the different competencies between the EU and national governments. “What we’ve seen in the past has been a bit of a mess, with the IORP Directive and portability rules conflicting with different requirements in national systems,” she says. “For the second pillar, our members say full harmonisation is neither necessary nor possible, because of different social and labour laws, and tax regimes.”

Each year, EAPSPI promotes an intensive internal discussion between members on specific topics: in 2014, the focus will be on communications. EAPSPI members have found that communications with scheme participants, particularly keeping in touch with deferred and pensioner members, is an important issue.

Another hot topic is women and pensions: “Between two-thirds and four-fifths of public sector scheme members are women,” says Kiwit. “Periods away from work for maternity or care leave mean women are likely to face old age poverty more than men.”

Additional concerns are supervisory practices, and benchmarking in cost-efficiency.

Kiwit, as EAPSPI secretary general, organises seminars on specific topics, distributes research, and prepares reports on working group discussions. Besides acting as a forum for members, EAPSPI can join the dialogue between member schemes and their legislators, providing expert opinion. Apart from that, it does not interfere at national level.

But it does act as the voice of public sector schemes at European level – for example, in EIOPA consultations. It is a member of the Group of Nine, an informal network of stakeholder groups including PensionsEurope and the European Association of Paritarian Institutions (AEIP), set up to review developments on the IORP Directive.

The challenge is to bring the right individuals together and address the right topics, says Kiwit.

“Much of my work is spent finding out who’s right,” she says. “And we also aim to be cost-effective ourselves – we do not spend money going out to dinner with European Commissioners.”